Transaction clarity helps reduce disputes & credit card chargebacks
As disputes and credit card chargebacks surge, transaction clarity helps reduce them
Payment disputes and chargebacks in the U.S. have been on a big upswing in recent years, driven by consumers’ growing preference for digital commerce. In 2023, U.S. consumers disputed 105 million charges, valued at an estimated $11 billion, according to an analysis by Datos Insights for the Wall Street Journal. That’s up 53% from the estimated $7.2 billion in charges disputed in 2019, with Datos forecasting that disputes will grow another 40% by 2026.
While the reasons for disputes rising vary, transaction confusion—when consumers don’t recognize charges on their statements—is a top reason. In fact, 79% of consumers surveyed said they’ve reported an unrecognized transaction to their bank, according to Ethoca’s 2024 Digital Banking Trends Report.
Transaction confusion happens for many reasons: Sometimes the merchant descriptor on the statement differs from what the merchant uses publicly. Sometimes the charge amount shown is higher than what the consumer thought they spent—perhaps because of taxes or shipping fees.
Preventing chargebacks and disputes with transaction clarity—and the right tools
So, how can merchants and issuers reduce disputes and ultimately reduce the costly toll of confusion-related chargebacks?
A collaborative tool like Ethoca Consumer Clarity™ provides consumers with the insight and information they need to avoid transaction confusion while also giving issuers and merchants valuable insight. Moreover, the new Mastercard First-Party Trust program, currently available in the U.S., can help merchants and issuers better manage transaction-confusion-related disputes.
Here’s a look at how these programs can help prevent disputes and chargebacks while helping issuers and merchants create a better customer experience.
1. Providing consumers with more visibility into their purchases
The high rates of transaction confusion suggest that consumers need more details about their purchases, as well as control over them.
Digital receipts that provide a clear summary of the purchase—such as a recognizable merchant name and logo; an itemized breakdown of the charge, including any fees; and a date and time of purchase—can help jog the customer’s memory of making a purchase and prevent them from disputing the charge.
Services such as subscription controls—also offered through digital banking apps—give consumers a way to pause or cancel subscriptions without needing to contact the merchant directly. This can improve the customer experience and reduce chargebacks upfront, as a significant 60% of them are related to recurring payments, according to a 2020 study by Mastercard.
2. Giving issuers’ teams access to more detailed information
Just as consumers need more information at their fingertips, so do issuers’ customer support staff.
Consumer Clarity provides transaction details to customers directly through their banking app and to customer support teams and call centers—so they can provide those details to consumers who contact them with questions about charges. Being able to quickly resolve customers’ disputes and questions about their transactions creates a far better cardholder experience and can reduce operational costs.
The new Mastercard First-Party Trust program is another helpful tool. It allows merchants to share information with issuers to help distinguish first-party fraud (aka friendly fraud) from true fraud—helping to prevent flawed disputes and putting better data into the payments ecosystem.
Reducing first-party fraud is critical, as detailed in Ethoca 2023 Chargeback Trends & Outlook Report, 75% of fraud experienced by digital businesses is first-party.
3. Helping merchants better connect with customers and build lasting relationships
As e-commerce becomes a preferred channel, consumers have come to expect exceptional customer experiences—from seamless transactions and easy returns and exchanges to greater personalization and self-serve digital tools. To build lasting relationships, merchants must meet consumers’ changing expectations.
The post-purchase customer experience is a big opportunity for merchants to engage and win loyalty, by keeping customers connected to their brand.
Consumer Clarity allows merchants to stay top of mind with their customers by providing branded digital receipts while helping them reduce costly disputes. Offering value-added services such as subscription controls can also make the overall purchase experience better while reducing the high operational costs to merchants of subscription management.
To stay competitive, it’s critical for merchants to find new ways to engage their customers across the buying journey and to win and retain their loyalty.
Putting experience first
Preventing chargebacks and the disputes that lead to them requires an ongoing, multifaceted effort. But tools like Ethoca Consumer Clarity and Mastercard First-Party Trust can reduce chargebacks while offering many other benefits—such as giving customers the visibility, control and experience they want.
